Here comes the shameless social money grab

Suddenly, social network services that used to be free now cost money. Here's why this is wrong.

Social networking sites are businesses, and they have the right or, in the case of publicly held companies, the obligation to make money.

But how?

That's the question everyone has grappled with since MySpace's Tom Anderson became everyone's first social friend.

For a long time, the default monetization scheme was advertising. But now that's changing. Suddenly, social services that used to be free are now available only for a price. It's a bad direction for social media to take, and I'll tell you why.

Here are four companies that are leading this trend.

Pheed

Pheed is Hollywood's answer to Twitter. It's run out of a Mulholland Drive mansion. (Think Entourage, but with engineers instead of actors and hangers-on.)

The site has already landed 200 stars, even though it's so new it didn't at deadline even have a Wikipedia page. Chris Brown, David Guetta, Ashley Tisdale and Miley Cyrus are enthusiastic early adopters.

Anyone can sign up to Pheed for free. But users can also charge for their posts. They can choose to charge a monthly subscription or offer pay-per-view for live broadcast events. The user selects the model and the pricing.

Pheed keeps half the money, and it says some of that revenue goes to pay third-party processors.

Pheed founders say charging money for content improves the quality.

That's a very Hollywood way to look at social media that stands in stark contrast to the Silicon Valley view, which is that great content rises from massive scale -- that you improve content by increasing, not decreasing, the number of people who can produce content.

Celebrities love the idea of Pheed, because it's a way for some of them to monetize their own fame.

And that's why I'm concerned about this monetization model.

Right now, celebrities are exploited by gossip rags, who post link-bait headlines to drive the celebrity-obsessed masses to their sites. I predict that celebrities will use Pheed to exploit their own fame for money.

The way this will work is that instead of posting snapshots from their personal lives first on Twitter, they'll do it on Pheed to their paid subscribers. Of course, the gossip sites will steal the pictures and write the same kinds of stories, but in doing so they'll drive interest in subscriptions to the celebrity's Pheed profiles. In fact, it's already happening.

A site called TheHollywoodGossip.com posted a short, vacuous story with a purloined personal pic under the headline, "Miley Cyrus Pantless Pheed Pic: Boo!"

What's happening here is that Cyrus is exploiting the gossip site's exploitation of Cyrus. The site is driving traffic to Cyrus's Pheed profile, which I assume Cyrus will charge fans to subscribe to in the future.

This will become the whole business model for the likes of Kim Kardashian and Paris Hilton, who are famous for being famous and want to convert their fame into an additional revenue stream. Pheed now enables them to sell prurient glimpses of their glamorous and scantily clad lives directly to the public.

The monetization scheme, in a nutshell, transforms what a social network is, from the public square to the shameless celebrity red light district and freak show.

Facebook

Facebook has been trying to monetize its social site in a variety of creative ways since going public May 17.

Earlier this month, Facebook began testing in the U.S. a service that allows everyday users to pay a small fee to have a post "highlighted," which means placed big and prominent on their friends' news feeds. It's glued to the top and, unlike other posts, doesn't go down right away to make room for new posts.

That sounds reasonable, until you consider that Facebook actively prevents most of your friends from seeing your posts on their news feeds. They use an algorithm called EdgeRank, which judges how close you are with each of your friends based on how much activity you each have on the other's profiles, then delivers the posts only to people Facebook software decides should see it.

Each of your posts on Facebook is blocked from appearing on an unknown majority of your friends' News Feeds.

Facebook "tweaks" this algorithm constantly.

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